Farmer Bros. Reports Net Loss Per Share of $(0.44) For Third Fiscal Quarter 2010
Net sales increased 29.7%, or $25.4 million, to $111.0 million in the third fiscal quarter compared with last year's third fiscal quarter.
Farmer Bros. Co. (NASDAQ: FARM) today reported unaudited results for its third fiscal quarter and nine months ended Mar. 31, 2010.
| (millions, except per share data) | Third Quarter | First Nine Months | |||||||||||||||||||
| Fiscal 2010 | Fiscal 2009 | Fiscal 2010 | Fiscal 2009 | ||||||||||||||||||
| Net sales | $ | 111.0 | $ | 85.6 | $ | 343.4 | $ | 228.7 | |||||||||||||
| Net loss | $ | (6.6 | ) | $ | (1.4 | ) | $ | (3.0 | ) | $ | (7.6 | ) | |||||||||
| Basic and diluted net loss per share | $ | (0.44 | ) | $ | (0.10 | ) | $ | (0.20 | ) | $ | (0.53 | ) | |||||||||
Net sales increased 29.7%, or $25.4 million, to $111.0 million in the third fiscal quarter compared with last year's third fiscal quarter. For the first nine months of fiscal 2010, net sales increased 50.2%, or $114.7 million, to $343.4 million. These increases were primarily driven by the addition of net sales from the Direct Store Delivery (“DSD”) Coffee Business acquired from Sara Lee Corporation as of Feb. 28, 2009, during last year’s third fiscal quarter.
“We continue to focus intensely on the integration of our businesses and on maximizing the efficiency and effectiveness of our nationwide organization. We have substantially completed this process and, as we take the final steps in the fourth quarter, we expect to begin to see the financial benefits of the combination,” said Rocky Laverty, President and CEO. “Although our operating expenses for the first nine months of fiscal 2010 remained essentially on track with our plan for the year, our net sales for the year have not met our expectations, reflecting decreased customer volume, particularly in the hard-hit Midwestern markets that we entered through the acquisition. We are, however, pleased with our progress at maintaining our customer base during the integration process, and we believe this will help position us strongly in all of our markets.”
Gross profit for the third fiscal quarter increased by 15.5% to $49.3 million from $42.7 million in last year's third fiscal quarter. For the first nine months, gross profit increased 39.4%, or $43.7 million, to $154.7 million. Gross profit as a percentage of sales, however, decreased in the third fiscal quarter to 44.4% from last year's 49.8%, and to 45.0% from 48.5% for the first nine months of fiscal 2010. This primarily was due to increases in the costs for coffee brewing equipment and service that are included in cost of goods sold, and the shift to a lower-margin product mix to reflect the requirements of new DSD customers.
Operating expenses increased by 32.3%, or $14.3 million, to $58.5 million in the third fiscal quarter of 2010 from $44.3 million last year. Operating expenses during the third fiscal quarter include three months of expenses related to the DSD Coffee Business operations, whereas last fiscal year’s third quarter included just one month of expenses related to the DSD Coffee Business operations. For the first nine months of fiscal 2010, operating expenses increased 47.2%, or $55.0 million, to $171.5 million. In addition, the change in operating expenses during the third quarter and the first nine months of fiscal 2010 reflected $1.9 million and $5.7 million, respectively, related to the costs of integrating the DSD Coffee Business. The Company estimates that total integration costs during fiscal 2010 will be approximately $13.0 million, of which approximately $5.0 million is expected to be capitalized.
| Third Quarter Year-Over-Year Increases | |||||||
| Net sales | 29.7 | % | |||||
| Cost of goods sold | 43.8 | % | |||||
| Operating expenses | 32.3 | % | |||||
The Company reported a loss from operations of $9.3 million in the third quarter of fiscal 2010 compared with a loss from operations of $1.6 million in the same period last year. For the first nine months of fiscal 2010, the Company reported a loss from operations of $16.9 million compared with a loss from operations of $5.6 million.
For the third fiscal quarter of 2010, the Company reported a net loss of $6.6 million, or $0.44 per common share, compared with a net loss in the prior year's third fiscal quarter of $1.4 million, or $0.10 per common share. For the first nine months of fiscal 2010, the Company reported a net loss of $3.0 million, or $0.20 per common share, compared with a net loss of $7.6 million, or $0.53 per common share, for the same period last year.
On a non-GAAP basis, the Company recorded cash flow from operations in the first nine months of fiscal 2010 of $12.7 million compared to $13.7 million in the first nine months of fiscal 2009 (please refer to the table, "NON-GAAP OPERATING CASH FLOW," below).
The Company ended the third fiscal quarter with cash, cash equivalents and short-term investments of $58.8 million, compared with $63.0 million on June 30, 2009. The Company increased its short-term borrowings under its senior secured revolving credit facility to $33.8 million, up from $16.2 million as of June 30, 2009, and ended the third fiscal quarter with $13.0 million in unused borrowing capacity under its revolving credit facility.
About Farmer Bros. Co.
Farmer Bros. Co. is a leading national direct store delivery business for coffee, tea and culinary products. It offers thousands of items under a broad portfolio of recognized brands, including roasted coffees, cappuccinos and cocoas; assorted hot and iced teas; spices and seasoning blends; salad dressings, sauces and soup bases. Its product lines and services are specifically focused on the needs of its customers: foodservice establishments including restaurants, hotels, casinos, and non-commercial foodservice providers, as well as retailers such as convenience stores, coffee houses, and general merchandisers. It also provides private-label coffee programs to retailers through Coffee Bean Intl., one of the nation's leading specialty coffee roasters. Farmer Bros. has paid a dividend in every year since 1953, and its stock price has risen on a split-adjusted basis from $1.80 per share in 1980.
| FARMER BROS. CO. | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
| (Dollars in thousands, except share and per share data) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended March 31, |
Nine Months Ended March 31, |
|||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| Net sales | $ | 111,002 | $ | 85,604 | $ | 343,354 | $ | 228,657 | ||||||||
| Cost of goods sold | 61,741 | 42,946 | 188,697 | 117,730 | ||||||||||||
| Gross profit | 49,261 | 42,658 | 154,657 | 110,927 | ||||||||||||
| Selling expenses | 46,771 | 35,279 | 135,737 | 93,476 | ||||||||||||
| General and administrative expenses | 11,778 | 8,985 | 35,809 | 23,098 | ||||||||||||
| Operating expenses | 58,549 | 44,264 | 171,546 | 116,574 | ||||||||||||
| Loss from operations |
(9,288 |
) |
(1,606 |
) |
(16,889 |
) |
(5,647 |
) |
||||||||
| Other income (expense) | ||||||||||||||||
| Dividend income | 849 | 752 | 2,382 | 2,701 | ||||||||||||
| Interest income | 73 | 350 | 1,101 | 1,288 | ||||||||||||
| Interest expense |
(290 |
) |
— |
(1,455 |
) |
— | ||||||||||
| Other, net income (expense) | 1,871 |
(2,419 |
) |
9,237 |
(13,082 |
) |
||||||||||
| Total other income (expense) | 2,503 |
(1,317 |
) |
11,265 |
(9,093 |
) |
||||||||||
| Loss before taxes |
(6,785 |
) |
(2,923 |
) |
(5,624 |
) |
(14,740 |
) |
||||||||
| Income tax (benefit) |
(210 |
) |
(1,486 |
) |
(2,665 |
) |
(7,113 |
) |
||||||||
| Net loss | $ | (6,575 | ) |
$ |
(1,437 |
) |
$ | (2,959 | ) |
$ |
(7,627 |
) |
||||
| Basic and diluted net loss per common share | $ | (0.44 | ) |
$ |
(0.10 |
) |
$ | (0.20 | ) |
$ |
(0.53 |
) |
||||
| Weighted average common shares outstanding – basic and diluted | 14,889,513 | 14,532,868 | 14,815,214 | 14,480,971 | ||||||||||||
| Cash dividends declared per common share | $ | 0.115 | $ | 0.115 | $ | 0.345 | $ | 0.345 | ||||||||
The notes to consolidated financial statements in the Company’s 10-Q filing are an integral part of this financial information.
| NON-GAAP OPERATING CASH FLOW (unaudited)
(In thousands) |
|||||||||||||
| Nine months ended Mar. 31 | |||||||||||||
| 2010 | 2009 | ||||||||||||
| GAAP loss from operations | $ | (16,889 | ) | $ | (5,647 | ) | |||||||
|
Add non-cash charges: |
|||||||||||||
| Depreciation and amortization | $ | 19,208 | $ | 12,410 | |||||||||
| ESOP and share based compensation | $ | 3,711 | $ | 4,013 | |||||||||
| Pension expenses | $ | 6,630 | $ | 2,913 | |||||||||
| Total non-cash charges | $ | 29,549 | $ | 19,336 | |||||||||
| Non-GAAP operating cash flow | $ | 12,660 | $ | 13,689 | |||||||||
